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Caterpillar downplays ’07 disruptions

Caterpillar says the major anticipated falloff in truck sales during the first quarter of 2007 should only been temporary and won’t affect its operations much

Jul 24, 2006

Caterpillar says the major anticipated falloff in truck sales during the first quarter of 2007 should only been temporary and won’t affect its operations much.

“We are seeing indications that fleets may be engaging in a pre-buy prior to the ‘07 regulations,” said Jim Owens, the company’s chairman & CEO, during the Caterpillar’s second quarter financial review with analysts.

“The Class 8 North American heavy-duty truck industry is anticipated to drop from about 315,000 units in ‘06 to about 190,000 to 220,000 units in ’07, [with that] drop expected to be more concentrated in the first quarter of the year,” he added. “For us, we anticipate the first quarter to be hit harder than the remainder of the year.”

Owens said truck sales should increase during the bottom half of ‘07 on strong freight demand.

He noted that Caterpillar is also planning to shift its manufacturing operations to cover a falloff in truck engine orders—especially from Freightliner and Paccar subsidiaries Kenworth of and Peterbilt—so plant capacity doesn’t sit idle.

“Actions include, but are not limited to, product rationalization, continued expansion into new applications and redeployment of productive assets,” Owens said. “Continued strength in non-truck engine applications over time should offset a portion of lost business and we are converting part of our mid-range engine assembly plant into a marine engine packaging center to capitalize on the growing demand for marine product while better utilizing shared production assets.”

“In terms of readiness for production, our component supplier and production processes are being validated and are on track for transition during fourth quarter this year,” he said. “Production and shipment of ‘07 engines is going to begin during the fourth quarter this year, with full implementation early in ‘07.”